Canada’s National Shipbuilding Strategy (NSPS)

Oct 7/13: More CCG Ships. Canada’s new Minister of Public Works and Government Services adds up to 10 Canadian Coast Guard ships to the NSPS. The additional C$ 3.3 billion would bring the NSPS’ planned total to C$ 38.3 billion, while fulfilling a FY 2012 budget commitment of $5.2 billion over 11 years to renew a very aged but necessary fleet. With that said, C$330 million for each of these 10 new ships is overpriced by a factor of about 5x, which is consistent with a comparison of Canada’s JSS project vs. Britain’s similar MARS/ Tide Class.

The new commitment would add up to 5 more Medium Endurance Multi-Tasked Vessels, which are ~65m, shallow draught ships that can lay/ emplace aids to navigation, and fill basic unarmed patrol and support roles.

Another 5 Offshore Patrol Vessels would be up to 75m long, but their focus would lean more toward fisheries protection than the long-range armed projection/ command and control role of larger OPVs like the Dutch Holland Class. They would also perform other basic patrol and support roles.

These 10 vessels would be built at Seaspan’s Vancouver Shipyards as part of the NSPS. Once built, they would join 9 new Hero Class Mid-Shore Patrol Vessels, which are based on the same Damen Stan Patrol 4207 design as the US Coast Guard’s new Fast Response Cutters. The Hero Class is built by Irving Shipyards but predates the NSPS, and the ships began entering service in May 2013. As one might guess, they’re named after service members who won posthumous awards for bravery.

Note the use of conditional phrases throughout this entry. What this announcement doesn’t look like, is a contract for a finalized design. The long and sorry record of Canadian NSPS delays means that unless and until the government starts issuing actual contracts, it’s hard to take it too seriously. Sources: PWGS Canada, “Vancouver Shipyards to build Medium Endurance Multi-Tasked Vessels and Offshore Patrol Vessels for the Canadian Coast Guard” | CDFAI 3Ds, “Mark Collins – Canadian Coast Guard Shocker – Ten (maybe) New Serious Vessels”.

Keep reading for the whole story with recent events put in context

In October 2010, the Canadian government issued a Solicitation of Interest and Qualification to 5 short-listed firms, for the opportunity to be part of the Conservative Party government’s 30-year National Shipbuilding Procurement Strategy. Up to 28 major ships would be built over that period, to equip the Canadian Navy and Coast Guard. One yard would build all combat ships, and the runner up would build the support ships. Up to C$ 33 billion in future work was at stake.

That set up a difficult political situation, in a country with deep regional divides and a high-quality but shaky shipbuilding industry. The USA’s Jones Act makes major sales to the neighboring American market virtually impossible, some foreign shipbuilders are subsidized by up to 40% by their home governments, and Canadian military needs are too small and infrequent to sustain an industry by themselves. In October 2011, the government announced their decision – but a decision is not a contract. Actual contracts have taken an inordinately long time, and the amounts issued have been so far beyond international norms that they raise fundamental questions about where the money is really going.

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Canada’s NSPS

HMCS St Johns(click to view full)

The projected C$ 33 billion, 28-ship mega-program has been split into 2 parts.

Irving Shipyards, which built the current Halifax Class frigates but could not sustain that industrial base, gets the combat ships award. They will build 6-8 Arctic Offshore Patrol ships as their 1st order of business, followed by 15 Canadian Surface Combatant replacements for Canada’s Halifax Class frigates and their aged Iroquois Class destroyers. Most of that work will take place around their shipyard in Nova Scotia. The planned total is 21 ships, and about C$ 25 billion. Which could be challenging, as the CSCs alone were once costed at $26 billion.

On the west coast, Seaspan subsidiary Vancouver Shipyards Co. Ltd. in North Vancouver, BC will build 2-3 JSS support ships to replace the Protecteur Class, 4 off-shore science vessels for the Coast Guard, and a new polar icebreaker, for a total of 7-8 ships, worth about C$ 8 billion. Despite the JSS’ long-running competition, and the fleet’s need, the 3 off-shore fisheries and 1 oceanographic science vessels will be the first ships built.

DCNS pitch

Canada’s 2012 “Status Report on Transformational and Major Crown Projects” did not mention the CSC at all, and the dates offered for the JSS and Arctic AOPS are not comforting. Initial Operational Capability isn’t expected for the JSS until mid-2018, while the AOPS won’t achieve IOC until 2019.

Even those dates are far from firm. The challenge is that the October 2011 selections are not in and of themselves ship contracts. The companies must sign an umbrella agreement, which happened in February 2012, and then they must sign individual construction contracts. Somehow, the governments of the day must secure competitive pricing from a shipbuilding industry that’s below-par globally in efficiency, and shipbuilders that face no competition because they’ve been pre-selected for their roles and associated programs.

Contracts & Key Events

2013

Oct 11/13: More delays. There isn’t even a contract for the JSS ships yet, and the government is already admitting to reporters that Canada’s existing supply ships will need to be retired before the new Berlin Class variants can enter service over the 2019-2020 time frame. This is a new admission, and it’s so even though the polar icebreaker project will be deferred in JSS’ favor.

Senior officials are already talking about a gap of “at least 18 months”, without even a contract in place. Shipbuilding isn’t even expected to start before “late 2016,” despite the use of a licensed design as the base Meanwhile, making JSS the yard’s first major military shipbuilding project sharply raises the odds of industrial mistakes and rework, cost overruns, and schedule failures.

Any delays will have costs and implications beyond even the JSS project, because Seaspan Vancouver doesn’t have the capacity to run both projects in parallel. Meanwhile, CGCS Louis St. Laurent will need at least $55 million in refits in order to keep operating until 2021 – 2022. Further JSS delays would force Canada to either spend more, or to field a navy with no supply ships and no icebreaker. Sources: Canadian government, “National Shipbuilding Procurement Strategy Secretariat announces Vancouver Shipyards to build the Joint Support Ships in 2016” | CBC, “Arctic icebreaker delayed as Tories prioritize supply ships” | Postmedia, “Shipbuilding schedule conflict to cost taxpayers extra $55 million”.

Oct 7/13: More CCG Ships. Canada’s new Minister of Public Works and Government Services adds up to 10 Canadian Coast Guard ships to the NSPS, and a separate speech says “Vancouver Shipyards will be adding [the C$ 3.3 billion program] to its order books”. This addition would bring the NSPS’ planned total to C$ 38.3 billion, while fulfilling a FY 2012 budget commitment of $5.2 billion over 11 years to renew a very aged but necessary fleet. With that said, C$330 million for each of these 10 new ships is overpriced by a factor of about 5x, which is consistent with a comparison of Canada’s JSS project vs. Britain’s similar MARS/ Tide Class.

The new commitment would add up to 5 more Medium Endurance Multi-Tasked Vessels, which are ~65m, shallow draught ships that can lay/ emplace aids to navigation, and fill basic unarmed patrol and support roles.

Another 5 Offshore Patrol Vessels would be up to 75m long, but their focus would lean more toward fisheries protection than the long-range armed projection/ command and control role of larger OPVs like the Dutch Holland Class. They would also perform other basic patrol and support roles.

These ship designs and their schedules “will be developed in consultation with [Seaspan’s] Vancouver Shipyards” as part of the NSPS. Once built, they would join 9 new Hero Class Mid-Shore Patrol Vessels, which are based on the same Damen Stan Patrol 4207 design as the US Coast Guard’s new Fast Response Cutters. The Hero Class is built by Irving Shipyards but predates the NSPS, and the ships began entering service in May 2013. As one might guess, they’re named after service members who won posthumous awards for bravery.

Unless the statement in the speech is a mistake, this order is an odd thing: a large contract for a large, fixed sum of money without a finalized design, or even a schedule. Sources: PWGS Canada, “Vancouver Shipyards to build Medium Endurance Multi-Tasked Vessels and Offshore Patrol Vessels for the Canadian Coast Guard” | CDFAI 3Ds, “Mark Collins – Canadian Coast Guard Shocker – Ten (maybe) New Serious Vessels”.

10 Coast Guard vessels added to NSPS plan

Sept 17/13: A better model? In a National Post op-ed, former Chief of Staff to Prime Minister Stephen Harper Ian Brodie discusses the recent collision involving HMCS Protecteur, and the dangers of a 2-ship resupply fleet. In order to avert this danger, he proposes a superior economic benefits model for the NSPS :

“The Canadian government plans to spend $60-billion on defence equipment in the next 20 years, and those dollars will inevitably have to serve both economic and defence policy objectives. There is nothing new about that…. Given Canada’s integration into the global economy, it is time to reconsider how defence procurement serves economic policy….

Since 2006, the Harper government launched and restarted free trade negotiations with many key trading partners. But few of those efforts have borne fruit. Perhaps the resupply ship procurement could serve as an experiment to try to conclude some of those negotiations. The Harper government could, for example, announce it will take bids from any shipyard in a country that has a free trade agreement with Canada as of April 1, 2014. American and Norwegian shipyards would immediately be eligible to bid, and both the EU and South Korea might find it valuable to ensure their shipyards were also eligible.”

While the entire NSPS is projected to create about C$ 2 billion per year in economic benefits, a free trade agreement with South Korea alone would be worth C$ 1.6 billion per year, in return for a MARS-style opportunity to build 4 larger ships for less than the current 2-ship budget. An EU deal would be much larger, at C$ 12 billion per year.

The catch? Even at 6x the level of annual economic benefits, a free trade deal link doesn’t allow a party to favor the current NSPS arrangements, and thereby secure specific seats in Parliament from those communities. So long as the rest of the country won’t take more seats away from that party for failure to deliver the free trade deals, or for poor contribution to the national defense, the good political payoff will overshadow a much poorer economic and defense bargain. Mr. Brodie knows this, but preferred to devote his article to the rational policy case. Sources: National Post, “Ian Brodie: A new model for defence procurement”.

DND has given the PBO statements of requirements for other programs before, like the F-35 and Joint Support Ships. Recently, however, the government has pulled that information from public web sites, and now argues that the information is outside of the PBO’s mandate. It further argued that financial data is within the confidentiality of the Privy Council (Cabinet). All they’d say is that the project exists, while offering that value of contracts to date, and target budgets.

That’s not nearly sufficient for useful audits or oversight. Which is precisely the point. It also feeds into an ongoing tug-of-war between the PBO and the current government, which does believe that PBO is overstepping its mandate in a number of areas. Source: Halifax Chronicle Herald, “Military guarding vessel info”.

May 2/13: Corruption? The Canadian Broadcasting Corporation goes out and does some research into the cost of arctic-capable Offshore Patrol Ships. What they find makes the C$ 288 million design figure (q.v. March 7/13) look more than suspicious:

“…the design of Canada’s new ships is based upon a Norwegian vessel [KV Svalbard] whose design Ottawa has already bought for just $5 million…. the Svalbard, was designed and built for less than $100 million in 2002.

Experts say the design price is normally 10-20 per cent of the total cost of the ships.

Another country with Arctic interests, Denmark, acquired two patrol ships for $105 million in 2007. They have modest ice-breaking capability, similar to the Canadian project, which allows for the ships to crunch through “summer ice” – about one-metre thick.

The Irish navy now is building two offshore patrol ships for $125 million.

In all cases, these prices include the design.”

There comes a point where a contract is so far out of line with international norms, that one is forced to wonder where the money is really going. Sources: CBC, “Shipbuilding contract holds $250M mystery”.

March 7/13: AOPS. Irving Shipbuilding receives a C$ 288 million detail design contract for Canada’s Arctic Patrol Ships. It’s a task-based contract divided into 7 work packages, with C$ 135 tied up in the first 2 packages. A construction contract is expected to follow in 2015.

Irving refers to themselves as the Prime Contractor for the AOPS project, and announces their key sub-contractors. Lockheed Martin Canada is the Command and Surveillance Systems Integrator, GE Canada is the Integrated Propulsion System Integrator, Lloyd’s Register Group handles Classification, Odense Maritime Technology (OMT) is the Marine Engineering and Naval Architecture Provider, and Irving subsidiary Fleetway Inc. is the Integrated Logistics Support Provider.

Creating that production ready design involves choosing specialist subcontractors and material suppliers, as well as the 3D designs. Irving expects that its team will reach a peak of 90 professionals in the Spring of 2014. Completion of a test production module will employ another 110 workers, bringing the team to 200. Public Works | Irving Shipyards and ancillary site.

AOPS Phase 2

Feb 22/13: The Canadian government offers a C$ 15.7 million trickle of contracts to Seaspan’s Vancouver Shipyard, in British Columbia. The money will be used to assess the Joint Support Ship design options, review the future CCGS John G. Diefenbaker polar icebreaker’s design, refine the design and specifications for the offshore fisheries science vessel, and produce plans for construction, material, subcontractors and labor.

The new polar icebreaker would replace the Canadian Coast Guard’s CCGS Louis S. St-Laurent heavy icebreaker. It’s being designed by the Canadian subsidiary STX Marine, with assistance from STX Europe’s Aker Arctic Technology. STX Marine is also involved in the design of the other NSPS vessels being built at Vancouver Shipyards. The offshore fisheries science vessels are intended to replace the CCGS Teleost, the Alfred Needler, and the W.E. Ricker. Public Works Canada | Seaspan Shipyards [PDF] | MarineLog.

Seaspan study contracts

Feb 19/13: CSC. Public Works Canada issues a release that tries to sound like it’s moving forward with shipbuilding, but what it really boils down to is:

“The Harper Government will seek industry input on a number of technical subjects related to the design of combat ships. The initial technical engagement session will be held in March. Additional sessions will be scheduled over the coming months as further industry input is required.”

Recall the June 14/12 statement by Commodore Daniel Sing, who said that the RCN hadn’t been able to “determine the exact sweet spot between what is desired in terms of capability and capacity, and the available budget.” This announcement follows the very 1st industry consultation in mid-November 2012, and takes place about a year after a framework agreement was signed with Irving. That’s a rather late start. One might legitimately ask how long this part of the process is supposed to take.

Feb 13/13: JSS & inflation. Opposition parties draw attention to the 2.7% inflation rate being used to cost the “C$ 2.6 billion” Joint Support Ship project, and to an internal DND audit that cites 3.5% – 5.0% as the norm for the shipbuilding industry. American defense planners have been known to use even higher figures. Public Works Minister Rona Ambrose defends the estimate as coming from their usual process, but doesn’t explain the deviation from industry norms.

Over the course of a long project, the difference can add up to tens or even hundreds of millions of dollars. Which means either higher defense spending, cuts to the project, or cancellation of other projects. Higher defense spending is unlikely any time soon, and it’s hard to cut a 2-ship project. The situation could become even worse if other NSPS projects pick up the same flawed estimate, but the inflation rate issue is likely to surface again later in 2013, when the Parliamentary Budget Office tables their report on the JSS program.

“National Defence reported late last year that biggest challenge facing the navy in 2012 was when its two support ships, the HMCS Protecteur and Preserver, went into maintenance at the same time…. because of their absence in late 2011 and early 2012, the navy was forced to turn to allies for help replenishing other Canadian vessels at sea until the re-supply ships came back online.”

“A former Irving employee said Irving Shipbuilding has reduced its engineering team to about four members from about 14…. Months of work by about 60 engineers will be done in Denmark by Odense Maritime Technology…. Top level designs will be done by General Dynamics Bath Iron Works of Maine in concert with Irving…. a sole-sourced contract for the [Integrated Platform Management System] electronics package – from steering to fuel lights — has gone to Lockheed Martin Canada.”

Irving Shipbuilding confirmed the Lockheed contract, but said the Odense contract wouldn’t be signed until the Phase II definition contract. They added that they’re moving people around, and in hiring mode for engineers. Even so, this is one area that bears watching. Ramping up trained manpower and delivering quality is very difficult, even for American shipbuilders faced with major projects.

Jan 28/13: CSC uncertainties.Vanguard Magazine publishes an article in the wake of the CSC’s 1st industry consultations, held in November 2012 – more than a year after shipyards were picked for NSPS. On the one hand, the workshop was more than an information session. It reportedly invited industrial suppliers to evaluate and rate 5 different procurement strategies.

On the other hand, there are a lot of uncertainties that go beyond future budgets. The government hasn’t yet settled the basic question of whether the CSCs will be new designs, for instance, or based on existing foreign designs. Nor have they clarified what equipment will be either transferred from existing ships (as the British intend to do with some Type 23 frigate equipment in the new Type 26s), or bought separately and furnished as a mandatory requirement.

At the industrial level, how the prime contractor will be determined isn’t clear, beyond the fact that it isn’t likely to be the shipbuilder Irving. A 2-team funded design competition is widely expected, but not confirmed. That makes it hard to work out production arrangements, or form teams. Deeper into the bid criteria, “best value’s” scope is unclear: immediate performance? Is lifetime cost a factor? What about industrial considerations? Almost a year and a half after picking its 2 shipbuilders, the government doesn’t have answers yet. It doesn’t help that the Royal Canadian Navy has no refreshed strategic vision to offer, in order to shape that best value discussion.

2012

Umbrella agreements signed with picks – but they aren’t contracts; Big AOPS delay, and minor Phase 1 contract; How capable are Canada’s shipyards?; Transparency what?; PBO will look at NSPS.

AOPS concept(click to view full)

Dec 11/12: Infrastructure: what’s the deal? In March 2012, the Nova Scotia provincial government gave Irving’s Halifax shipyard C$ 304 million: a C$ 260 million forgivable loan for NSPS related shipyard upgrades, and a C$44 million loan for generic marine industry improvements. The Canadian Taxpayers Federation wants to know what the government got in concessions for its $260 million giveaway, and what the interest rates are on the loans. The government insists that these payouts are a good deal, but won’t answer either question. Halifax Chronicle Herald.

Dec 6/12: PBO denied. Parliamentary Budget Officer Kevin Page is denied when he asks to see the winning NSPS shipyard bids, as part of a study examining the financial implications of the Joint Support Ship, and a similar effort focused on Canada’s project to build Arctic patrol vessels. From Canada.com:

“Public Works has provided PBO with some information related to the national shipbuilding strategy, including a number of agreements and reports related to Seaspan’s Vancouver Shipyards for the resupply ship study…. In a letter to Page dated Dec. 3, d’Auray indicated the winning bids were not relevant to the PBO study because they “do not stipulate awarding contracts, and the bidders were not asked to submit cost estimates for any of the vessels.”

Oct 19/12: Infrastructure. Part of the NSPS involved meeting a “target state” level of efficiency, as set by First Marine International standards. The ability to reach this state, and to finance the required upgrades, was an important part of the bidding process. Along those lines, Vancouver Shipyards holds a ground breaking ceremony as part of their C$ 200 million infrastructure investment: 4 new fabrication buildings, a shipbuilding gantry crane, and a load out pier.

While the government touts the investment as having “no cost to Canada,” Costs will be passed through one way or another. Especially when the shipyards in question are now sole-source bidders. The more likely result is that they’ll soak the provincial government for most of the funds, as their east coast counterparts at Irving did (q.v. Dec 11/12). Government of Canada

Oct 19/12: AOPS. Irving Shipbuilding President Steve Durrell discusses the C$ 260 million in give-aways from the Nova Scotia government, but he offers a cautionary note as he discusses the schedule, and explains why the jobs haven’t materialized as fast as expected. CBC:

“Knowing what we see for the vessels and seeing for the design requirements and mitigating the risk associated with the design, we see 2015 as the realistic time to cut steel…. We need to start engineering in January [2013] in order to cut steel in 2015. If we get delayed a month it will delay the program a month.”

Oct 16/12: Irving Shipbuilding submits, then withdraws, a legal objection to having the details of the NSPS umbrella agreement released. Canada’s Public Works Department received an access to information request for the umbrella agreements signed with Irving and Seaspan, and was going to release the documents when Irving cited “trade secrets and commercial information.”

What changed? It turned out that only part of the agreements was being released, and when they reviewed that, they withdrew their objection. Which implies that the released section(s) will provide very little insight. Ottawa Citizen.

Oct 1/12: Invidious comparison. Finance Minister Jim Flaherty announces that imported cargo ships, tankers and large ferries will no longer be subject to a 25% tariff, on the grounds that “the ships to which they apply are not capable of being made competitively in Canada.”

While it’s nice to save the industry $25 million per year for the next 10 years, what does that judgment mean for a government that’s about to entrust the same shipyards with the construction of similar or larger naval ships, built to more challenging specifications? CBC News | Unambiguously Ambidextrous blog.

Aug 3/12: PBO audit coming. The Canadian Parliamentary Budget Office has confirmed that they’re looking at the NSPS, following questions by the Liberal party’s defence critic. They will offer an independent assessment of the project’s risks, implications, and long-term costs. Postmedia | CDFAI.

July 10/12: AOPS. We’d like to say that the NSPS is underway, but we can’t. The Canadian government has issued a C$ 9.3 million contract to Irving Shipbuilding Inc., but all that gets them is a review of the existing Arctic Offshore Patrol Ship design and specifications, and “an execution strategy” for the project.

Hint: the execution strategy starts with a contract to build ships. Which might have been expected to follow on the heels of the design contract, but hasn’t. Public Works Canada | CDFAI.

AOPS Phase 1

June 20/12: CSC.Canada’s Postmedia reports that Canada’s Treasury Board has agreed to release several hundred million dollars for ship design of Canada’s CSC replacement frigates. The problem is that the same briefing notes state that the new ships would need to enter the design phase in 2011, in order for CSC design to finish by 2016, and ensure initial deliveries in the early 2020s. Meanwhile:

“Briefing notes prepared for Associate Defence Minister Julian Fantino in May 2011… state [that Canada’s Tribal Class destroyers] “will reach the end of their planned service life beginning in 2017, at which point they will be over 43 years old.”… Yet the notes also say the Iroquois-class “will not be replaced before it is retired,” an assessment that was confirmed Wednesday by a senior official within National Defence.”

“I would caution once again that negotiations with Irving Shipbuilding with respect to this plan are not yet concluded and some things can change… The Royal Canadian Navy, notwithstanding the success to date of the National Shipbuilding Procurement Strategy and its selection of preferred shipyards, is not yet able to determine the exact sweet spot between what is desired in terms of capability and capacity, and the available budget.”

Postmedia News adds that DND officials told the government in 2011 that budget cuts had made its overall military procurement plans “unaffordable.” Now deficit reduction plans look set to reduce that amount, with cuts of up to $2 billion expected, while negotiations with the shipbuilders continue to stall. Nova Scotia Premier Darrell Dexter, whose province has the most to lose from a CSC cut, is showing outward calm so far. Meanwhile, Chief of Defence Staff Gen. Walter Natynczyk has called NSPS his highest priority, adding: “But we need to start cutting steel.” Cape Breton Post | Halifax Chronicle Herald | Postmedia | Postmedia Foreign Affairs & Defence blog.

May 14/12: Planning for delay. DND’s Report on Plans and Priorities 2012-2013, includes “Supplementary Tables: Status Report on Transformational and Major Crown Projects”. The section covering the CSC has no useful information, but the projected dates from the JSS and AOPS are less than comforting. Treasury Board DND “Status Report on Transformational and Major Crown Projects” | CDFAI.

May 9/12: AOPS delayed.The Ottawa Citizen reports that the NSPS’ 1st project, the armed Arctic Offshore Patrol Ship, has been pushed back to 2018. In addition, the $3.1-billion project is now expected to cost $40 million more than anticipated. The information comes from documents tabled in Canada’s house of Commons on May 8/12, presumably DND Sessional Paper No. 8520-411-134.

The project was announced in 2007, with a contract award expected by 2009, and a 2013 delivery date. The NSPS wasn’t even finalized until October 2011, which had pushed expected delivery to 2015. Now it’s 2018. Denmark is often cited as a comparison for Canada’s arctic defense efforts, and their approach has been well-thought out and executed. One might also consider Australia’s approach to a similar problem.

Feb 15/12: Agreements. The Government of Canada announces that it has signed umbrella agreements for the construction of National Shipbuilding Procurement Strategy’s (NSPS) combat and non-combat fleets. With these contracts, the firms involved can begin design and other work.

Jan 12/12: Irving Shipbuilding welcomes Prime Minister Stephen Harper and Minister of Defence MacKay to their Halifax Shipyard facility, to mark the successful conclusion of an agreement in principle to build Canada’s future combat vessels. Their release also cites the C$ 90 million in private investment made in the shipyard over the last 5 years.

2010 – 2011

From shortlist to selection takes a year.

Oct 19/11: Tim Colton was right, it took just over a year from Canada’s government to announce the obvious. In their partial defense, there was a May 2011 federal election in between, and at least they didn’t pick an obviously disastrous political choice for the 20-30 year, C$ 33 billion program.

Combat ships winner Irving did not discuss sub-contractors, but many opportunities can be expected, given the combat ships’ complexity and the need for equipment types that aren’t made in Canada.

July 21/11: The Quebec Superior Court authorizes the sale of Davie Yards Inc.’s assets to Upper Lakes Group (ULG), a joint venture composed of Canadian engineering firm SNC-Lavalin, ULG and leading global shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME). With that sale, ULG can submit a bid for Canada’s National Shipbuilding Procurement Strategy (NSPS) before today’s deadline. SNC Lavalin.

Oct 8/10: Shortlist. Public Works Canada announces the results of their initial shipbuilding strategy Solicitation of Interest and Qualification. One yard will be selected to build combat vessels, while a 2nd yard will build non-combat vessels. Five Canadian shipyards have been short-listed:

These 5 will be invited to participate in the Request for Proposal (RFP) process, and will meet with the National Shipbuilding Procurement Secretariat on Oct 12/10 in Ottawa. The public works release goes on to detail all of the measures being taken to ensure fairness, but Tim Colton’s Oct 12/10 Maritime Memos offered a blunt assessment of the solicitation:

“Well now, Davie is bankrupt (for about the tenth time since WWII); Kiewit (that’s Marystown Shipyard, in Newfoundland) is much too small, and Seaway Marine (that’s the old Port Weller Dry Dock, in St. Catherines ON) is a repair yard these days and hasn’t actually built a complete ship since 1992. So, bearing in mind the obvious political desirability of selecting one yard in the east and one in the west, we seem to be left with Irving Shipbuilding and Vancouver Shipyards. Given that Irving has a track record of building surface combatants and Vancouver doesn’t, it seems to be what I believe is called a no-brainer to divide the work accordingly. Now watch while they take about a year to come to that conclusion.”

Appendix A: Decision and Reactions, 2011

Picking shipyard winners is a contentious process, and the fact that the Quebec yard failed to win could have been problem. So far, however, NSPS complaints have been muted. Several factors account for this. One is that the process was designed to be firewalled from political interference. Such designs, in and of themselves, rarely survive sustained political pressure.

Another is that 2 political safety valves were built into Canada’s naval procurement needs, without creating engineering or technical problems.

Regular maintenance and repair, valued at C$ 500 million per year, will be open to all Canadian shipyards through normal procurement processes. In practice, the 2 main shipyards will be in a strong position, but it will make other shipbuilders cautious about burning any bridges.

The other safety valve is an even shinier consolation prize: plans for up to 116 small coastal, patrol, and utility ships will involve open competition, except for the winning Irving and Seaspan shipyards which are excluded from this projected C$ 2 billion contract set. ULG in Quebec looks to be in a strong position there, and Kiewit’s Newfoundland facilities may also have an opportunity.

A 3rd explanation for the muted reaction may be even more decisive: the demise of the Bloc Quebecois in the May 2011 election. The Bloc itself went from holding 47 of Quebec’s 65 Parliamentary seats, to just 4 seats – below official party status in the House of Commons. The socialist NDP opposition’s 58-seat gain in Quebec, from 1 seat to 59, made them Canada’s official opposition for the 1st time. On the other hand, the party has ties to unionized shipyard workers, and a long history in Nova Scotia and BC, where they also have key seats. That makes them necessarily cautious about criticizing a development seen as great good news by those groups, and they have remained true to that pattern following the NSPS announcement.

It should be noted that even if the 2011 election had returned a mirror image of the 2008 Parliament, the electoral math would have remained poor for Davies. Stephen Harper was an influential figure in the Reform Party, which rose to prominence in Western Canada when the Progressive Conservative Party was destroyed in the 1993 election (from 151 seats, to 2). One of the major factors in the PC party’s western annihilation involved the improper award of an aerospace contract to a Quebec firm, over a far more qualified western firm in Manitoba. Reform would later merge with the smaller PC party in 2003, in a political marriage that was more a takeover than a merger of equals. The last PC Party leader in Canada was Peter MacKay, now known as the Conservative Party of Canada’s Minister for Defence.

Neither Prime Minister Harper, nor his defence minister, will have forgotten that lesson.

Even with the Bloc present in strength, the Conservatives could still have embraced the recommendation, confident in the support of an NDP whose investment in the Maritimes and BC was far more important to the party than Quebec was, and a Liberal Party that would have been as conflicted as the NDP is now. The Bloc would have made the bankrupt Davie yard’s loss a bigger issue, but not a winning issue. Which was probably the political calculation when the National Shipbuilding Procurement Strategy was first formulated.

Additional Readings

Note that the DND site is currently broken, and its links are unlikely to work.